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3 things you need to get financing

A good credit score. Check your score at the three major credit bureaus: Equifax, Experian and TransUnion. Lenders say 600 is the minimum while you’re in a good spot with a score of 740.

A steady job, the biggest clue you’ll be able to make your monthly payments. Consult a lender to figure out how much money you have to work with and which loan product would work best.

Enough for a down payment, which varies by loan size and type. Typically, a down payment is 10 or 20 percent. However, people are still able to lock in 90-95 percent loans, depending on the market and consumer’s circumstances, said Steve Hops, residential president of the California Mortgage Bankers Association and senior vice president of Guild Mortgage in San Diego.

3 things you need to re-finance

Repeat steps 1 and 2.

“Some equity in the home,” Hops said. “There are no more 100 percent loans available in order to refinance.” How much is enough? It depends on loan type and interest rates.

Helpful websites

The U.S. mortgage-lending landscape has changed drastically from the boom years when, in many cases, lenders were generous with zero-interest terms and no-down payments.

Now, the scene is much different: Requirements are more stringent, potential homebuyers are going through more hoops and lending rules have changed.

The Union-Tribune spoke to several local and national mortgage experts to help consumers navigate the current market. It’s easily explained with a series of “thens” (during the local market’s peak in 2005-2006) and “nows.”

Mortgage rates

Now: Though rates have risen steadily in the past few months, they’re still historically low, hovering around 5 percent, said Mark Riedy, executive director of University of San Diego’s Burnham-Moores Center for Real Estate.

It’s unclear how long such rates will last, but they are heavily affected by many factors, including the tense political climate in the Middle East and the future unwinding of government-backed lenders Fannie Mae and Freddie Mac.

(Mortgage rates tend to track the yields in the bond market. During tumultuous global times, investors tend to gravitate toward bonds because they are less risky than stocks. That drives up the price of the bond, but pulls its yield down — and mortgage rates often follow.)

Financing

Then: People for the most part took out conventional loans from commercial lenders.

Now: It’s FHA-insured financing, which is popular among first-timers because it requires only a 3½-percent down payment, as opposed to 10 or 20 percent.

According to DataQuick Information Systems, FHA loans accounted for 33.2 percent of all mortgages used to buy homes in January in Southern California. Three years ago, they made up just 2.6 percent of the market.

Standards

Then: Lenders were giving out “liar” loans,” mortgages that don’t require documentation of income. Subprime loans, made to people with poor credit, also were popular. In exchange for the loan, borrowers had to pay higher rates or fees.

Now: Guidelines are much tougher. Now it’s about “income and ability to pay,” said USD’s Riedy.

Lenders are requiring people to show proof of income, and processing times are longer than usual. This has been particularly hard for those who are self-employed and have trouble providing such proof, experts said.

“Sometimes, there’s no logic to it,” said Scruggs, the mortgage manager with Guild. “In our intro letter, we try to prepare people for it and tell them we don’t make these rules. We just follow them.”

Other things to know --

Types of conventional financing

One is a conforming loan, which has a limit set by Fannie Mae and Freddie Mac. Nationwide, that amount is $417,000 for single-family homes, Scruggs said. The next level is a high-balance loan, which has a limit based on median prices within a county. For San Diego County, it’s $697,500. Anything beyond this point is called a non-conforming or “jumbo” loan.

“As you go from one category to the next, the availability of certain programs changes,” Scruggs said. “The down payment requirements go up, and the interest rate goes up. For instance, a high balance loan may be about 0.25 percent higher in rate than a conforming loan.”

What to know about closing costs

Closing cost, fees that lenders charge, make up about 2-4 percent of the home purchase price, according to bankrate.com. They include application and processing fees, third-party fees, such as appraisals and title insurance, and government fees, including taxes.

Bankrate.com reported that California was the fourth most-expensive state in closing costs in a 2010 closing-costs survey. (See that survey here.) Experts at the mortgage-rate site say such costs have increased because of the sluggish economy and stricter lending rules that require more document checks, which require more time and money.